Ev'ry time we say goodbye
20 June 1995
10 June 2013
29 January 2014
16 August 2013
12 June 2013
20 February 2014
Once you are labelled as an unproductive partner, it is only a question of time before you depart. Many firms have 30 April as their year end, and the decision to part company, if not the actuality of departure, tends to be made at that time, if only for the sake of tidiness.
In those firms which operate on a 'revolving door' basis, to be asked to leave can come as no great shock. But it is still a serious blow to the ego to be labelled as a partner who has not made the grade.
In those firms which purport to promote team spirit the shock of being asked to leave can be catastrophic.
Until recent times, partners were also friends. Many rooted their social lives within the confines of the partnership. To have your friends say you are no longer wanted on the voyage can be the ultimate blow to self-esteem. Many lawyers are more wedded to their partners than to their spouses. The parallel of the trauma is obvious.
There are no overall recipes for success in getting rid of a partner. Each case has to be treated on its merits. Outside help is often required to make the target see reality. While the threat of expulsion is always there, if there is a well-drafted partnership deed, it is best for all concerned for the departure to be negotiated.
Many firms provide and pay for out-placement counselling for their target partners. It is a humane gesture, as well as a tax deductible expense.
Most law firms, except for the truly enlightened, negotiate for themselves. It is understandable that they do not want to be seen to wash their proverbial dirty linen in public. The target needs separate representation, if only to provide a sounding board and give a semblance of normality to an abnormal situation.
The skills required vary from 'hard ball' litigator through trade union negotiator, to marriage guidance counsellor. A good knowledge of partnership law, together with tax expertise are also required.
In negotiating terms, both sides need to keep the iron fist in the velvet glove. To end in the Chancery Division is the hallmark of failure. Why let barristers have a lucrative field day at your expense?
A negotiated settlement should leave both sides' pride intact. Such a settlement is primarily about money, but it is also about saving face. If a pre-emptive sacking can be dressed up as a voluntary departure, so much the better.
Some partners, coming to the end of their careers, who have found it difficult to keep up with their peers, may even feel a sense of relief. If the children are grown up and the mortgage is paid off, it may be a lot easier to negotiate terms which are geared towards pension requirements.
It is a good deal harder to find the right solution for the partner in mid-career with a hefty mortgage and children at fee-paying schools.
In those cases where there is no partnership agreement, and there are still far too many, dissolution is often the only threat, if the target is disinclined to leave. This can be tantamount to financial suicide, but usually the threat produces the desired result, especially if counselling can be brought into play.
Those in the business have their mental checklists for a negotiated settlement. High priority will be the announcements to be made both within and outside the firm. Tax needs to be considered carefully and there are ways of mitigating the more serious effects to the benefit of the target.
Goodwill can be a stumbling block. In the 1990s, it is sometimes necessary to demonstrate that it has been replaced by ill-will. Do assets and liabilities have to be revalued or can the parties be persuaded to take a view?
During the negotiations, the target may veer from outright hostility to abject despair in
relation to his soon-to-be former partners. It is not a pleasant process and ought to be concluded as speedily as possible. Sometimes this cannot be achieved, and time is required to make both sides see reason.
Not so long ago, partnership, like a pet, was for life. Nowadays, the law is no different from show business. You are as good as your last performance.
Michael Simmons is a partner at Finers and a consultant on professional practice problems.